The Election and the FED

The election this week produced a small rally in stocks and the odds are favorable that the rally may well continue into the end of the year and into next. When 18 of the last 18 midterm elections produced a rally within a year, and the average return being 17% it is hard to ignore this historical tendency.

On the other hand the Federal Reserve, as they have clearly stated, plan to keep raising interest rates into 2019. If that is the case the FED has consistently gotten it wrong by pushing us right into the next recession. Many experts feel the FED is the cause of many recessions because of their insistence in increasing interest rates in a strong economy. They fear inflation and overheating and because of that fear they are the main culprit of an economic slump. As we all know in an economic slump the stock market falls hard.

So which will it be a rally in the next year or will the FED lead us into the next recession? With the Congress split there is little likelihood that much will get done in Washington but that tends to be good for stocks not bad.